Changes will be made simplifying the tax collection mechanism for taxable income distributed to non residents by Australian managed funds (and Australian custodians). The Assistant Treasurer said that this measure will reduce compliance costs for the managed funds industry by replacing a number of tax collection regimes with multiple rates with a single tax collection regime with a single rate. As a result, Australian managed funds and custodians will collect a non final withholding tax at a single rate — the company tax rate - on this income regardless of the identity of the non resident, instead of multiple rates ranging from 29 to 48.5% as is currently the case. Current withholding tax arrangements for dividends, interest and royalty income of non-residents will not be changed. This simplified tax collection mechanism subsumes the Government’s Review of International Taxation Arrangements commitment to set the rate of tax on rental income distributed by Australian property trusts to non residents at the company tax rate. The design of the legislation will be subject to consultation with the business community.

For a copy of the Treasurer's press release No 39, 9 May 2006, go here